Talking strategy, LLC might well now be between a rock and a hard place.
The Barbarians (hedge funds and instos) are at the gate and are offering 29.5 all day every day plus 30 cents and now sneaking up to 30.5 cents. And there's still a number of weeks to get a toe hold. The volume says they are rampant as they must smell blood.
But the selling side has slowed to a trickle. The smaller, frustrated guys have taken the easy way out.
But in voting and negotiating terms, surely they have been replaced by stronger, more business "savvy" people who have paid an entry price not much short of the offer.
Even if they were doing their sums on 1.5c return on an investment of 29.5c for say 2 months...that's a yield of 30.5%
But....look what happens if they can agitate for even a paltry 1c increase...the yield goes up to 50.8%!
No, these guys are accumulating as fast as they can...and no doubt they are talking amongst themselves.
I'd bet their position is this: LLC want this thing...even their intention of stapling as just announced is a further signpost.
If the whole thing comes to nothing and LLC get the votes...our downside is covered....we make a decent return based on the time we held.
BUT...we make a KILLING if we work hard on LLC to extract more dollars.
Conclusion: We vote NO...but in the meantime we let LLC know we are voting NO and that we are interested in a deal...we might even nominate a price point that starts to get us mildly interested.
Hey, we might even have teamed up with our other hedge fund pals to present a more unified force.
I mean...let's look at the downside here. What if LLC don't get the votes. What happens then?
They clearly are in a relationship they don't like..it's much like a divorce.
As the solicitors say in these situations: At the end of the day...when its over its over...so a settlement is required...and the speedier the better.
One party will pay more that they think they should and the other party will receive less that they think they should get. Mediators call this a WIN-WIN by the way, particularly when it avoids the useless argy-bargy of the legal system and courts.
....AND LLC KNOW ALL OF THIS...PROBABLY EVEN INCLUDED IT IN THEIR PLANNING.
Opening Shot: Offer 31 cents to get reaction. It's our first offer so its not at the point where we will walk away if the deal is not done.
If we get it up...with the help of a few associated friends who might be in the market buying...great. If not, its second phase play.
Second Phase Play:
Once the share register has stabilised after the NO vote I'd imagine there would be a greater concentration in the hands of institutions...LLC will work the phones to get respective positions.
Then they'll put a more formidable offer on the table which they know will be acceptable to a greater percentage voting block.
This could be an increased cash offer or a part LLC scipt offer and some cash.
I really don't think the increased offer will come before the vote...though I find it intriguing that the last letter from Chairman Andrew (which was mostly about covering his Ar$e on been compromised) was trying to slow people down.
Take your time...wait for the documentation to come in November before you vote...yadda yadda.
Could he know or suspect that something else is coming?
And is asking us not to vote yet!
Anyhow...I think they have seen the angst and maybe are toting up the NO votes for the upcoming AGM.
At the very least, I'd like to think LLC must be dusting the covers of the Second Phase play and working out their strategy for the higher offer.
As I said...it will end up with us getting less that we think we deserve and them paying more than they think they should.
I reckon the negotiation red zone is between 35 and 40 cents.
LLP Price at posting:
30.0¢ Sentiment: Hold Disclosure: Held
